Shulou(Shulou.com)11/24 Report--

CTOnews.com, Oct. 2, according to Yonhap news agency, Samsung Electronics is expected to reduce the chip deficit in the third quarter, mainly due to the continued reduction in chip production.

Kim Dong-won, an analyst at KB Securities, forecasts that Samsung's device Solutions (DS) division, which is in charge of the cash cow chip business, will lose about Won4,000bn in the third quarter, down from Won4.35 trillion in the same period last year.

Since the second half of the year, Samsung has increased its DRAM production cuts to 30 per cent from 20 per cent in the first half to 40 per cent from 30 per cent in the first half of the year, he said.

In the first quarter of this year, Samsung's DS division suffered an operating loss of 4.6 trillion won (CTOnews.com Note: currently about 24.932 billion yuan), the first financial loss for Samsung in 14 years.

Choi Bo-young, an analyst at Kyobo Securities, said that while production cuts and the dynamic balance between supply and demand have begun to push up the price of memory chips, they will also put pressure on profits.

Kim Kwang-jin, an analyst at Hanhua Investment Securities, predicted that Samsung's chip performance would fall short of market expectations, as the company seemed to take longer than previously expected to fully recover its chip business. He estimated the third-quarter loss of the DS division at 3.7 trillion won.

Greg Roh, head of research at Hyundai Automotive Securities, said the impact of Samsung's production cuts so far had been "minimal" and that higher depreciation costs caused by the launch of a new chip production line in Pingze had eroded profits. He also thinks Samsung's DS division lost 3.6 trillion won.

TrendForce, a market statistician, said Samsung's actions to address overcapacity exceeded previous expectations. Samsung has taken the "decisive step" of cutting NAND flash production by 50 per cent in response to continued weak demand, which could help stabilize chip prices and boost demand in the coming months.

TrendForce added: "Samsung's sharp production cuts could trigger a chain reaction: the prices of its main products could rise."

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